How COVID-19 Impacted Supply Chains and What Comes Next

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The COVID-19 pandemic exposed significant weaknesses in global supply chains, highlighting issues like overreliance on limited suppliers and poor visibility. A late 2020 Ernst & Young (EY US) survey of 200 senior U.S. supply chain executives revealed that the crisis accelerated digital transformation and highlighted the need for greater resilience, collaboration, and connectivity.

Companies are now investing in technologies like AI and automation, while also reskilling their workforce to build more agile, data-driven supply chains. This article presents three key findings on how supply chains are adapting in the wake of COVID-19.

Chapter 1: The Pandemic’s Heavy Toll on Supply Chains

The COVID-19 pandemic caused widespread disruption across global trade, healthcare, finance, education, and business, more than any crisis in recent history. Only 2% of surveyed companies felt fully prepared, with 57% facing severe disruptions and 72% reporting negative impacts (17% significantly so). Despite the turmoil, 92% of businesses maintained or increased their tech investments, highlighting the rising importance of digital supply chains in responding swiftly to shifting market demands.

Industry Variations: Winners and Losers

Some sectors, particularly life sciences, fared well. 11% of companies reported positive outcomes, often driven by increased demand (71%) and rapid product development (57%), especially for COVID-19-related innovations like diagnostic tests and vaccines.

In contrast, automotive and industrial products companies suffered the most, with 100% of automotive and 97% of industrial products respondents citing negative impacts. Many consumer product companies also struggled to meet demand for essential goods like toilet paper and canned food in the early weeks of the pandemic.

Workforce Disruption and Technological Response

Workforce disruption affected 47% of all companies, with employees adapting to remote work or, in the case of factory workers, to new safety measures including physical distancing, PPE, and contact tracing. In response, industrials and high-tech manufacturers have accelerated investments in automation and innovative technologies to reduce employee exposure and maintain operations in labor-intensive environments.

These challenges and innovations underscore how COVID-19 has reshaped supply chains across industries and highlighted the urgent need for resilience, adaptability, and digital readiness.

Chapter 2: Supply Chains Are Being Reimagined

Significant changes are underway as companies shift their supply chain priorities toward visibility, efficiency, and resilience. According to the survey, enhancing operational efficiency and reskilling workers will be the top focus areas over the next three years. But above all, supply chain visibility is emerging as the leading priority, reaffirming findings from a 2019 EY survey that ranked visibility as the most critical component of supply chain success.

Why Visibility Matters More Than Ever

Traditional linear supply chains give way to more interconnected networks involving hundreds or thousands of suppliers. Technologies like IoT sensors and real-time data tools are key enablers, allowing companies to track goods and monitor conditions (such as temperature for frozen foods or vaccines) throughout the supply chain.

Reskilling and Workforce Transformation

With 61% of companies planning to retrain employees within the next year, there’s a clear shift toward preparing the workforce for more digital, agile operations. Key workforce strategies include:

Increased automation (63%)
Investment in AI and machine learning
- 37% have already deployed these tools
- 36% plan to implement them soon

Training will also focus on adapting to remote collaboration, evolving business strategies, and ensuring health and safety compliance on-site.

Sustainability Goals Stay in Focus

Contrary to the assumption that sustainability efforts were paused during the pandemic, the survey found that 85% of companies are now more focused on environmental and social goals than before. This renewed commitment is being driven by:

Investor demand for ESG performance transparency
Employee interest in values-driven employers
Rising customer expectations
Expanding global regulations

As a result, sustainable supply chains are no longer optional – they’re becoming the norm.

Chapter 3: The Digital and Autonomous Supply Chain Is Taking Shape

The pandemic has rapidly accelerated trends that are already transforming supply chains, particularly the move toward digitalization and automation. According to the survey, 64% of executives say the pandemic has sped up their digital transformation plans, and over half (52%) believe autonomous supply chains, featuring robots, automated planning, and AI-powered logistics, will be in place by 2025.

From “Doing Digital” to “Being Digital”

Adopting digital tools isn’t enough. True digital transformation means building a connected supply chain that integrates planning, procurement, manufacturing, and logistics across all partners, not just within a single company.

Think of the future in terms of “lights-out” or “self-driving” supply chains, where AI helps make predictive and prescriptive decisions across the entire network. For example, if customer demand shifts, the whole value chain, from suppliers to manufacturers, can adjust quickly, improving efficiency and responsiveness.

Strategic Importance Is on the Rise

60% of executives say their supply chain has become more strategically important since the pandemic. To keep pace, companies must redesign their supply chain organizations to fit the digital-first, resilient, and agile world ahead.

Five Priorities for the Future of Supply Chains

What’s Next?

While many hope the pandemic was a once-in-a-generation crisis, hope isn’t a strategy. Companies must take action – reimagining risk, investing in digital capabilities, empowering their workforce, and committing to sustainability.

By doing so, organizations can turn future disruptions into opportunities and emerge stronger, smarter, and more connected.

Summary

EY research confirms that COVID-19 exposed and accelerated long-standing supply chain issues. Visibility, resilience, and digitization are now top priorities. While some industries like life sciences gained ground, most sectors are focused on reskilling talent and investing in the technologies needed to build a more autonomous, adaptable supply chain for the future.

Reimagine Supply Chain Strategy

Redefine your operating model to align with evolving trade rules, omnichannel growth, and new tax and incentive structures. Rethink what should be done locally, regionally, or globally.
Build Visibility and Resilience

Use real-time monitoring and scenario planning to handle disruption. Diversify suppliers and locations to reduce risks from overdependence.
Cut Costs and Unlock Cash

Improve cost structures by rationalizing SKUs, reducing procurement spend, optimizing logistics, and improving manufacturing productivity. Adjust payment terms and inventory practices to free up working capital.
Gain a Competitive Edge Through Sustainability

Embrace circular economy principles. Redesign products to eliminate waste and assess sustainability risks across your full supplier base (tiers 1–3).
Use Digital Supply Chains to Drive Growth

Build a fully digital, end-to-end supply chain. This not only boosts efficiency but also opens the door to new revenue streams and competitive advantages.